Aon near deal on fraud probe

Illinois joins N.Y. settlement talks

Illinois Atty. Gen. Lisa Madigan has joined settlement talks between Aon Corp. and New York's attorney general that would end fraud investigations of the Chicago-based insurance broker, said sources familiar with the talks.

Connecticut and possibly some others states also are involved in the discussions, as Aon looks to resolve the probes in one multistate settlement, the sources said.

The attorneys general offices in Illinois, New York and Connecticut all declined to comment.

An Aon settlement could come as early as next week, but sources said chances of that happening were slim because of the complexity of the talks and the number of parties involved. Insurance commissioners involved in the settlement also would have to sign off on any agreement.

Aon declined to comment on any possible settlement. In an interview with Bloomberg News on Thursday, New York Atty. Gen. Eliot Spitzer said, "There has been an ongoing relationship, negotiation, process of inquiry with Aon. And at some point that will reach fruition."

Spitzer is scheduled to visit Chicago on Wednesday to receive an honor at the Union League Club and may meet with Democratic fundraisers about his campaign for New York governor in 2006.

After Spitzer brought civil fraud charges against Aon rival Marsh & McLennan Cos. in October, several other states launched copycat probes of alleged collusion between brokers and insurance companies. Aon, the world's second-largest insurance broker, has said it is cooperating with all investigations.

Like Marsh, Aon accepted special payments from insurers that have been at the heart of the probes. Spitzer likened these payments, known as contingent commissions, to kickbacks after uncovering evidence at Marsh that the fees led to bid rigging and other anti-competitive practices.

Spitzer's investigation also has reportedly found evidence at Aon of coercive arrangements known as tying, in which the broker steered business to insurers who in turn would let the company arrange its reinsurance. Insurers use reinsurance to spread their risks.

Aon has not been charged with wrongdoing in any of the investigations, and the company has said "to the best of our knowledge" none of its employees has engaged in bid rigging or soliciting fake price quotes. The company has admitted that some employees violated its ethics codes, but stopped short of acknowledging any illegal acts.

As Spitzer showed in his investigations of abuses in the securities and mutual fund industries, it isn't necessary to have a lawsuit to reach a settlement.

Aon signaled earlier this month that talks were progressing when it set aside $50 million toward potential settlements of state investigations.

If the legal reserve is any indication, Aon likely will pony up far less than the $850 million Marsh agreed to pay last month to settle Spitzer's suit.